Employing Backpackers

Backpackers can be a great source of cheap labour, allowing you to run your business for less. They can bring needed skills to your business or provide unskilled labour on a seasonal basis. However, it is important that you stick to the law. If you employ illegal workers or exploit them, there can be serious legal consequences. Make sure that you have yourself covered if you’re employing backpackers.

What legally constitutes a backpacker?

To start with, let’s get our definition of backpacker straight. Backpackers are travellers who are on the road and may be staying in your area for a short while. They may be from another part of Australia, or they may have come from another country.

If they are Australian citizens, normal employment rules apply. Overseas visitors, on the other hand, require different laws. No one can work without a visa that gives them the right to work in Australia. Many backpackers will get a visa to pay for their travels.

A 462 is limited to one year’s stay, while a 417 can be renewed for another year. As far as the employer is concerned, that is the main difference between the two. For the backpackers themselves, there is another main thing to worry about. The 417 will only be renewed if they can prove that they have worked 88 days in the first year. You may have workers who are anxious to reach this target.

The 500, on the other hand, is only permitted for those who are studying in Australia. It will normally cover the length of their education.

What laws apply?

Firstly, anyone in Australia is subject to Australian laws, no matter where they come from. This means they should be paid according to the relevant Modern Award. You will need to pay 9.5% of their gross pay into a superannuation fund if they earn more than $450 a month. You must also cover workplace health and safety laws where they are working.

You need to check their visa and understand how long it lasts for. If you don’t, you will be held liable for not carrying out these checks. You also need a tax file number for that employee. If you let them work without checking their papers, and the employee turns out to be illegal, you’ll still be in trouble.

Be aware that even if you are providing meals and accommodation instead of pay, this needs to be documented. You also need to top up their salary if the value of what you provide is not high enough.

Make sure that your employees all have benefits as set out in the National Employment Standards. You also will need to withhold tax for working holiday makers according to the latest rates. This is currently 15%, though do check, since it may change. You will need to register as an employer for this rate to apply - otherwise you should withhold 32.5%. The rate changes at $37,000 or $87,000, respectively, to normal foreign resident withholding rates.

You must also provide payment summaries starting from the 1st of January each year for each backpacker you employ.

What are the risks?

If you knowingly or unknowingly break these laws when hiring a backpacker, the consequences could be serious. You could be imprisoned for up to two years. This increases to five if the backpacker is being exploited. Fines also apply, from $15,000 for an individual to $80,000 for a company.

You must register as an employer of a working holiday maker before the first payment that you make to your employee, or you may face penalties.

Employing backpackers can be a great way to keep your business running through the busy months. However, it could all come crashing down if you are found to break the law. Make sure that you are always covered and always carry out checks.

Etax Plus is an accounting and tax firm based in Sydney. With over nine years of experience in the accounting and finance industries, Etax Plus has the expertise to assist you or your business with all your accounting needs.